Arbitral Tribunal is the Supreme Judge of the quality and quantity of Evidence- Bombay High Court in the case of Kavis Fashions Private Limited Vs. Dimple Enterprises and others

Case title: 

Kavis Fashions Private Limited Vs. Dimple Enterprises and others

Date of Order: 

05th JUNE, 2023

Bench:

Justice Manish Pitale

Parties:

Petitioner - Kavis Fashions Private Limited

Respondent - Dimple Enterprises and others

SUBJECT

The Arbitration and Conciliation Act of 1996 is a vital piece of legislation that governs dispute resolution in India. The act provides a framework for arbitration and conciliation proceedings, as well as the enforcement of arbitral awards. Under the act, parties to a dispute may agree to resolve their differences through arbitration or conciliation. Arbitration involves the appointment of an arbitrator or a panel of arbitrators to decide the dispute outside of the traditional court system. Conciliation, on the other hand, involves the appointment of a conciliator to help the parties reach a mutually acceptable settlement.

IMPORTANT PROVISIONS

Arbitration and Conciliation Act, 1996

• Section 34(4)
• Section 17

OVERVIEW

• The petitioner was involved in footwear manufacturing and export and was searching for a plot to set up an additional manufacturing facility.
• In July 2006, the petitioner entered into negotiations with respondent No.1 concerning land in Andheri (East), Mumbai.
• Respondents Nos.2 to 4 are partners in respondent No.1's firm
• During negotiations, respondent No.1 handed over documents to the petitioner and the parties exchanged emails and communications in that regard. 
• On 18.08.2006, the respondents submitted an application before the competent authority for re-validation of existing plans for the development of the plot of land and deposited the required amount. 
• On 31.08.2006, a Memorandum of Understanding (MoU) was executed between the parties. It consisted of various clauses, specifying stages of payment by the petitioner to the respondents.
• On 15.09.2006, the advocates of the head lessors of the plot of land in question sent a notice to respondent No.1, asking him to terminate and forfeit the lease indenture dated 12.06.1958.
• The petitioner stated that this detail was made known to him only on 14.04.2007.
• The petitioner filed Arbitration Petition No.143 of 2007 before this Court claiming certain interim reliefs which were dismissed.
• This decision was challenged before the division bench of this court, which also disposed of the appeal.
• Later on, the petitioner again filed an application under Section 17 of the Arbitration Act seeking interim relief.
• The tribunal passed the impugned award and directed the petitioner to pay the respondent's arbitration costs amounting to Rs.20 lakhs.
• Aggrieved by this decision, the petitioner filed the present petition.

ISSUE RAISED

• Is the impugned award dated 19.03.2014, passed by an arbitral tribunal constituted for resolving disputes between the parties maintainable?

ARGUMENTS ADVANCED BY THE PETITIONER

• Mr. Shyam Mehta represented the petitioners.
• He contended that the tribunal's order/minutes of meeting dated 06.09.2010 was set aside and the tribunal was requested to reconsider the petitioner's amendment application.
• It was submitted by counsel that the tribunal completely failed to consider the nature and scope of power under Section 23(3) of the Arbitration Act.
• Reliance was placed on the case of the State of Goa Vs. Praveen Enterprises [(2012) 12 SCC 581] to hold that amendment to a claim or a counter-claim ought to be granted by an arbitral tribunal in the interest of justice.
• The counsel further submitted that the tribunal, in the present case, erred in rejecting the amendments by citing the case, Rajesh Kumar Aggarwal Vs. K. K. Modi [(2006) 4 SCC 385].
• It was also argued that a party challenging an arbitral award of the tribunal could use the minority award as evidence to prove why the majority award should be invalidated.

ARGUMENTS ADVANCED BY THE RESPONDENT

• Mr. Kamdar represented the respondents in this case.
• Firstly, the counsel relied on the case, Lindsay International Private Limited Vs. IFGL Refractories Limited [2021 SCC OnLine Cal 1979], wherein it was held that the petitioner's argument under Section 23(3) of the Arbitration Act that the respondent's objection to an amendment can only be based on delay is not valid.
• The counsel contended that rejection of an amendment application could never be challenged under Section 34 of the Arbitration Act.
• It was submitted that the grounds raised in the petition and the subsequent grounds added by way of amendment to challenge the order dated 20.08.2021 in the present petition were misplaced. 
• The counsel relied on the cases, Container Corporation of India Limited Vs. Texmaco Limited, [2009 SCC OnLine Del 1594], and Punj Lloyd Limited Vs. ONGC [2016 SCC OnLine Bom 3749] to substantiate the above point.
• The counsel asserted that the MoU could not be a binding contract. It was indeed an agreement to enter into an agreement that could not be performed.

JUDGEMENT ANALYSIS

• The high court dismissed the petition with a no costs order.
• The court ruled that under Section 34 of the Arbitration Act, the order rejecting the amendment application may not be regarded as an interim award that can be challenged by a petition filed by an independent party.
• However, after the arbitral proceedings are over and the final award has been challenged, there is certainly a ground for challenging the rejection of the amendment application. This is done in a petition filed under Section 34.
• The court observed that as per Section 23(3), the respondents can oppose the application for amendment filed by the petitioner on all available grounds.
• The court viewed that it cannot be said that the majority award committed an error in holding that the MoU was an agreement to agree, specific performance could not be granted.

CONCLUSION

In the present case, the scope of jurisdiction of this Court under Section 34 of the Arbitration Act was clarified. Section 34 provides for the application for setting aside an arbitral award. According to this Court, rejection of an amendment application in the present petition filed under Section 34 of the Arbitration Act cannot be challenged. It was reiterated that the arbitral tribunal is the supreme judge of the quality and quantity of evidence. Any possible view of the arbitral tribunal must necessarily pass muster in a challenge brought under Section 34 of the Arbitration Act.